Stocks, bonds and other investments are just some of the family assets up in the air when you divorce or separate. Don’t be overwhelmed if your spouse or partner managed the money. You may be entitled to a tidy sum yourself.
Who Owns Family Assets
Legally married couples usually own what’s called net family property equally. Once the ink has dried on your marriage certificate or marriage contract, you’re committed to more than just staying together till death or divorce. Common law couples have a less certain financial future. Basically, unless you made a cohabitation agreement as a common law couple, you own whatever you had when you entered the relationship and anything you acquired together.
Property Division of Shared Investments
The days of joint bank accounts are over for many modern couples. That doesn’t mean your finances aren’t “co-mingled”. While you may not share everything (gifts from third parties, inheritances, life insurance payouts or personal injury settlements, for example), full and frank financial disclosure is a must when you apply for divorce in Ontario or prepare a formal separation agreement as a common law couple.
Agreeing to Go Your Own Way
Separating as a legally married couple is the first step in dividing up net family property (NFP), as it’s called. Your NFP is all your assets, minus debts, on the day you separated. Next, make the same calculation as of the day you married. That will give you the net worth you brought into your marriage. If you were in a common-law relationship, prepare a similar financial record but remember that property division rules apply different for common law spouses. Unlike legally married spouses, assets like the family home are not divided equally.
Calculating Investments When You’re Married
Say you currently have $65,000 in government bonds and that old staple, GICs, minus your car loan of $18,000. Your assets minus debts are $47,000. You had $32,000 the day you married. Your NFP for investments is $15,000 ($47,000-$32,000).
Your savvy investor spouse has $98,000 in blue chip stocks, exchange-traded mutual funds and cash waiting to be invested. He’s still paying a $30,000 Ontario student loan and $12,000 is owed on his 2015 SUV. His assets minus debts are $56,000. He brought $48,000 to the marriage. His NFP for investments is $8,000 ($56,000-$48,000).
Combined, your total NFP as a couple is $23,000 ($15,000+$8,000). Provided neither of you contributed to your investments as a result of a third-party gift or inheritance, Ontario family court would equalize your NFP. That would make your share $11,500, putting your spouse out ahead of you. If the amount was negative, your NFP would be zero.
Adding an Investment Property
Your spouse bought an income property after you married, making a five per cent down payment of $15,000 and taking out a CMHC (Canada Mortgage and Housing Corporation) mortgage of $275,000. He’s on the property title, you aren’t, and neither of you have ever lived there. The outstanding mortgage is $246,192.68 and the home has appreciated by 20% or $60,000 in the four years since he bought it.
The investment property is now worth $360,000 – $246,192.68 = $113,807.32.
You have options. You can:
- Buy out your spouse’s share ($56,903.02), giving you sole ownership, legal title and the mortgage payments.
- Agree to sell and split the proceeds 50/50.
- Evict the renters, live there with your kids until they are financially independent, then sell and split any profits equally.
Your spouse may ask you to reimburse him for 50% of the down payment when you do sell, but it’s worth it.
Common Law Couples Fare Less Well
If you lived common law in our example, you’d leave the relationship with more than your partner. You’d each take only those assets you had when you met, unless you bought any investments jointly. If you did, those joint assets would be split 50/50.
Co-mingled Investments and Marriage
When you are married and you use excluded property — like third party gifts, inheritances, life insurance payouts or personal injury settlements — to buy joint investments, it becomes a shared asset. Before you co-mingled it with your spouse’s investments, it was yours to enjoy. Now it is considered a joint asset and part of your NFP. The same applies if you deposit it in a joint bank account or buy a matrimonial home where you live together. Keep careful records of potentially excluded property so it doesn’t come back to bite you. It’s one more reason to make a marriage contract or cohabitation agreement and not leave anything to chance.
Get Legal Advice from a Divorce Attorney
Axess Law’s Ontario family lawyers give you legal advice on dividing your family property during divorce. Divorce attorneys can chat with you by online video conference anywhere in Ontario, 7 days a week, day or evening. Make an appointment by calling 1-877-522-9377 or in Greater Toronto 647-479-0118 or use our online booking form. In person meetings with our Ontario divorce lawyers are available at our Ottawa, Toronto, Scarborough, Vaughan, Etobicoke, Mississauga Winston Churchill or Mississauga Heartland law offices.
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